Shift to the Cloud includes shift to cloud marketplaces
Posted on January 29, 2023
Shift to the cloud is not new in the 21st century - trillions of IT spend has, and will continue to move to the cloud. As an increasing number of companies go through digital transformation, which accelerated during COVID, many C-Suite conversations are taking place on how they can leverage the cloud to better sell their products. Buyers turn into sellers (and vice versa) on cloud marketplaces to access this budget for their own sales and strengthen partnership with the cloud providers.
AWS and Azure first launched their commercial marketplace in 2012 (with GCP following thereafter) and it has evolved into a major channel for many B2B vendors, where the process is vertically integrated, all the way from lead generation to procurement. The shift to cloud marketplace has accelerated in the last 5 years. Marketplace throughput is approximately doubling every year and we’re still in the first inning.
“Cloud marketplace procurement will go fully mainstream, and become a standard component of the SaaS go-to-market playbook.”
- Bessemer Venture’s 2022 cloud report
Cloud providers are committed to growing their B2B software marketplace as they continue developing partner programs / co-marketing budgets. Microsoft Azure and Google Cloud Platform (GCP) recently lowered their marketplace fee to 3% to further incentivize sellers to join.
Early adopters are getting ahead of their competition by meeting the buyers where their budget is - cloud commitments.
Doing it yourself can start with a few months dev time and it can quickly snowball as your company’s marketplace business grows. High growth companies often employ full engineering squads to set up and maintain the integrations. In addition to API migrations from cloud providers, every discrepancies and bugs on internal product impact billing, requiring constant barrage of P0 tickets. As a reference, Chengjun (CTO) was the tech lead on their internal marketplace team, which had 10+ engineers dedicated to this work.
In addition to engineers, army of ops headcount to manually register leads, update usage reports, reconcile data across multiple data sources, and work cross functionally to drive marketplace sales. Crowdstrike is another example of an early marketplace adopter, whose team of 10+ “alliance operations analysts” to manually handle this process.
Today, direct-to-customer channel is the most common for most software companies. It’s the most intuitive - hire sales people, identify the ideal customer profile (ICP), and aggressively create pipeline and convert. After a prospect becomes a customer, the sales team identifies cross-sell and up-sell opportunities to increase NRR.
I saw this work scale first-hand at Salesforce where forecasting was generally correlated with sales headcount. The rule of thumb was “put 20% headcount in, get 20% ACV out.” Traditional sales is a linear funnel, with funnel and conversion data readily available for you to properly forecast, allocate resources, find hotspots, and change messaging or org alignment to adapt to MoM, YoY trends.
There’s a myriad of sales tools in the market to help you refine the internal gears of the funnel - e.g. Salesforce (relationship management), 6sense (intent/enrichment), Zoominfo (contact database), Outreach (prospecting).
That’s where Suger comes in! Learn more about what we do.